Saturday, May 1, 2010

Grannan: On eliminating "bad" workers

Blaming teachers is the current hottest fad in “education reform,” and the sub-fad is pronouncing that getting rid of “bad teachers” would magically solve all our problems.

Of course there are some truly problematic teachers who shouldn’t be teaching at all, so let’s note that right off the bat. But what I’m addressing here is the frequently repeated claim that the private sector just efficiently gets rid of the bad and rewards the good and doesn’t have these problems. A parent posted the comment below on one of our local education listserves in response to one of those claims. I’m reposting it anonymously with her permission.

“I have to chime in about the supposed efficiencies of the private sector. My husband works for a large corporation that, like so many, first underwent "extreme hiring" during the boom and then underwent massive layoffs.

“If the private sector was so good at weeding those who perform poorly from those who do well, you'd think only the best and the brightest would be left, but that isn't true. Certainly he works with a lot of great people, but there is still dead wood, including a couple in management. Usually these are people who talk a good line (and so might be best used in sales, to be honest), but never turn in their piece of the project on time.”

Here’s my own view. My background in a private-sector industry is in unionized daily newspapers. Our pay scale was based on seniority, from <1>6 years, and then negotiated raises in the contract. "Overscale" pay could be and was awarded on an individually negotiated basis -- the equivalent of merit pay, of course.

The universal belief among my colleagues was that overscale was awarded when an employee was in a specific position to leverage management – for example, I made some due to taking on an unappealing position that nobody wanted, in an emergency – or to employees who were particularly aggressive and skilled at negotiating.

There was not a shred of belief in our newsroom that overscale was awarded based on actual pure merit.

I still sometimes see the byline of a former co-worker who was barely functional doing the actual job (reporting, writing, editing) but who was always charming, persuasive and winning, and gave great meeting. That colleague moved up from my former workplace, the San Jose Mercury News, to one of the names you would immediately mention if you were asked to name the nation’s top three or four newspapers.

I’m not sure where the people who believe that the private sector is so great and successful at rewarding the good and weeding out the bad have been working, but I’m not completely convinced it’s on Planet Earth.

[The above is a guest post by Caroline Grannan]


The P.P. adds:

Not only is the private sector incapable of assembling a body of perfect workers, they sometimes eliminate the best ones they have if the powers in authority don’t “like” what someone is doing (think vengeful principals).

In a segment about the part fraud played in the Great Collapse of 2008, Bill Moyers interviewed William K. Black, a veteran regulator and expert on Wall Street tricks and fraud. From the transcript:

BILL MOYERS: I watched the testimony where you were present the other day in the Lehman hearings. And there was a very moving moment with a former vice-president of Lehman Brothers who had gone and tried to blow the whistle, who tried to get people to pay attention to what was going on. Take a look.

MATTHEW LEE: I hand-delivered my letter to the four addressees and I'll give a quick timeline of what happened, May 16th was a Friday, on the Monday I sat down with the chief risk officer and discussed the letter, on the Wednesday I sat down with the general counsel and the head of internal audit, discussed the letter. On the Thursday I was on a conference call to Brazil. Somebody came into my office, pulled me out, and fired me on the spot with out any notification. I stayed, sorry.

BILL MOYERS: Matthew Lee, vice-president of Lehman Brothers, fired because he tried to blow the whistle. What does that say to you?

WILLIAM K. BLACK: Well, it tells me that they were covering up the frauds, that they knew about the frauds and that they were desperate to prevent other people from learning.

BILL MOYERS: Matthew Lee told the accounting firm Ernst & Young what was going on. Isn't the accounting firm supposed to report this, once they learn from somebody like him that there's fraud going on?

WILLIAM K. BLACK: Yes, they're supposed to be the most important gatekeeper. They're supposed to be independent. They're supposed to be ultra-professional. But they have an enormous problem, and it's compensation. And that is, the way you rise to power within one of these big four accounting firms is by being a rainmaker, bringing in the big clients.

And so, every single one of these major frauds we call control frauds in the financial sphere has been-- their weapon of choice has been accounting. And every single one, for many years, was able to get what we call clean opinions from one of the most prestigious audit firms in the world, while they were massively fraudulent and deeply insolvent.

BILL MOYERS: I read an essay last night where you describe what you call a criminogenic environment. What is a criminogenic environment?

WILLIAM K. BLACK: A criminogenic environment is a steal from pathology, a pathogenic environment, an environment that spreads disease. In this case, it's an environment that spreads fraud. And there are two key elements. One we talked about. If you don't regulate, you create a criminogenic environment because you can get away with the frauds. The second is compensation. And that has two elements. One is the executive compensation that people have talked about that creates the perverse incentives. But the second is for these professionals. And for the lower level employees, to give the bonuses. And it creates what we call a Gresham's dynamic. And that just means cheaters prosper. And when cheaters prosper, markets become perverse and they drive honesty out of the market.

Black explains more about “Gresham’s dynamic” in his piece “The Audacity of Dopes” (Huffinton Post, 2/10/2009)

Executive compensation and the compensation systems used for appraisers, accountants, and rating agencies were designed, and served, to create the perverse incentives and ethical rot that caused the ongoing financial crises by producing a "Gresham's dynamic" in which fraudulent and abusive lending and accounting practices drove good practices out of the marketplace.

There is no doubt that this same mentality has settled into the business of education reform. The data-driven obsession has created an environment that offers perverse incentives and causes ethical rot. Just google “test score cheating scandals” to see the fraud; it's just the tip of the iceberg.

Elevating data as supreme then using it to dismantle public school systems is only one piece of evidence that the mentality operating on Wall Street is the same one driving today’s ed reform. Find out more about what's behind it here, and wish us all luck.

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